Author: Andrew Sheng, China Banking Regulatory Commission
Even as Asia appears on the journey towards the Asian Century, it may be worthwhile to look back in two ways.
First, it was not that long ago that we suffered the Asian Financial Crisis (1997-99). Few of us who went through the pain of that crisis would forget that the journey out of darkness was months of sleepless nights and stress-filled days. But that pain was worth it because there was sufficient change to weather the current Global Financial Crisis. Read more…
Author: Andrew Sheng, University of Malaya and Tsinghua University
There are a lot of global architecture, theoretical, and micro-institutional incentives issues that Asia must address in the wake of the GFC.
Conventional wisdom is not helping to solve the dilemma of a global market that is still regulated at national levels. Read more…
Author: Andrew Sheng, University of Malaya and Tsinghua University
Every Chinese child knows the old story about monkeys who were offered a choice of two bananas in the morning and three in the afternoon, versus three in the morning and two in the afternoon. Most monkeys chose the latter, but the traditional answer was that there should be no difference because both choices end up with five bananas. Who is right?
Actually, the monkeys are right. Three bananas in the morning are better than two in the morning because there is a preference for consumption now versus consumption later. Read more…
Author: Andrew Sheng, University of Malaya and Tsinghua University
At the 10th Anniversary of the Euro’s launch in 2009, there were some suggestions that one-day the Euro might even take over the role of the US dollar as the dominant reserve currency. After all, the US dollar had been depreciating due to the subprime crisis against the Euro. Less than a year later, the Euro is sliding as a result of the Greek debt crisis.
Doubters are now pointing to a political and structural crisis of the Euro, and focusing on the need for stronger fiscal discipline. The Maastricht Treaty, that led to the creation of the euro area, was unable to bind the euro area members to fiscal discipline. Read more…
Author: Andrew Sheng, China Banking Regulatory Commission and Qatar Financial Centre Regulatory Authority
If a pack of wolves stalk a herd of buffalo, the herd can guard the weaker buffaloes. But if the wolves stampede the herd, they are able to take down the weakest buffaloes.
Financial crises behave similarly. The market speculators are like wolves that attack the weakest or most vulnerable economy. During the Asian crisis, the markets attacked Thailand first, because it had the highest external debt. This time, the markets attacked Greece, the most vulnerable economy in the EU. Greece may be the 27th largest economy in the world, but with a GDP of US$352 billion, it is only 3.1 per cent of the size of the EU. Read more…
Author: Andrew Sheng, China Banking Regulatory Commission and Qatar Financial Centre Regulatory Authority
The Global Financial Crisis (GFC) has shattered conventional wisdom about global governance.
Governor of the Bank of England Meryvn King’s dictum that global banking is global in life, but national in death, characterizes complex financial institutions that are larger than sovereign nations, are ineffectively regulated at national levels, and lack global laws. Their demise means that national governments have to pay for the global banks’ mistakes, but ultimately the whole world pays in the form of higher inflation, taxation and lost jobs. Read more…
Author: Andrew Sheng
We are seeing a change all over Asia. Thanks to Asian giants like Gandhi, Nehru, Mao and Deng, the revival of India and China is changing the 21st century.
If we were to take a grand macro-historical perspective, with India and China both growing at more than 8 per cent per year, whilst the G-3, US, Europe and Japan are growing at less than 2 per cent a year, the relative power between the mature economies and the emerging markets is changing dramatically.
Angus Maddison projects that, by 2018, China will overtake the USA as the largest economy in the world, with India as number 3. By 2030, he estimates that Asia (including Japan) would account for 53 per cent of world GDP, whereas the US and Europe would only account for 33 per cent.
If this were the case, the global financial architecture would have to be significantly different from the present.
Read more…
